Ringgit Swings Between Gains, Losses as Malaysian Polls Approach

By Liau Y-Sing -
Apr 3, 2013

Malaysia’s ringgit swung between
gains and losses after Prime Minister Najib Razak dissolved
parliament, paving the way for polls that will determine if his
government stays in power to continue its economic reforms.

The Election Commission will meet in a few days to announce
a date for the vote, its spokesman Sabri Said said after the
dissolution of the legislature today. The premier, who has
opened the banking and insurance industries to more foreign
investment, saw his approval rating fall to an 18-month low in
February, the latest survey from the Merdeka Center for Opinion
Research released Feb. 26 shows.

“One overhang was when they will hold elections and that
element has been removed,” said Wong Chee Seng, a currency
strategist in Kuala Lumpur at AmBank Group. “The other overhang
is the results and only after this is removed will we see a
stronger appreciation of the ringgit.”

The ringgit climbed 0.1 percent to 3.0842 per dollar as of
4:49 p.m. in Kuala Lumpur after declining as much as 0.3 percent
earlier, according to data compiled by Bloomberg. One-month
implied volatility, a measure of expected moves in exchange
rates used to price options, fell seven basis points, or 0.07
percentage point, to 6.75 percent.

“The dissolution of parliament doesn’t take away the
uncertainty in terms of how much of its majority the government
can hold on to and what this means for policies,” said Vishnu Varathan, a Singapore-based economist at Mizuho Corporate Bank
Ltd.

Malaysian exports probably fell 4.9 percent in February
from a year earlier, after increasing 3.5 percent the previous
month, according to the median estimate in a Bloomberg survey
before a government report due April 5.

The yield on the 3.26 percent bonds due March 2018 held at
3.23 percent, according to data compiled by Bloomberg.